M&S To Axe Stores At Home And Abroad As Rowe Beats Retreat
Marks & Spencer Group Plc announced plans to shut 30 U.K. clothing stores and switch others to food-only outlets as Chief Executive Officer Steve Rowe unwinds the expansion efforts of his predecessor and seeks to reverse years of lackluster performance.
The retailer will also shutter 53 stores outside the U.K. and begin consultations with 2,100 workers as it retreats from 10 countries including China and Belgium, it said Tuesday, while cutting its margin outlook for the year.
“M&S have been trying to dig their general-merchandise business out of trouble for several years, but for now it seems that the time has come to stop digging,” said Phil Dorrell, partner at consultant Retail Remedy. “By closing stores and cutting jobs without an accompanying announcement on a new strategy, M&S are giving in.”
M&S veteran Rowe is taking immediate action to address the fashion retailer’s struggles at home and abroad after replacing Marc Bolland as CEO this year. Domestic clothing sales have been in near constant decline for five years as shoppers defect to nimbler rivals such as Hennes & Mauritz AB and Inditex’s Zara. International earnings have been weighed down by weak demand in Europe and turbulent economic conditions in Asia and the Middle East.
The domestic closures will take place over five years and cost about 350 million pounds, M&S said, without disclosing how many jobs will be lost. The downsizing represents the end of an era for the 132-year-old company that was long regarded as the bellwether of U.K. retailing.
“These are tough decisions, but vital to building a future M&S that is simpler, more relevant, multi-channel and focused on delivering sustainable returns,” Rowe said in the statement.
The domestic closures will reduce the amount of space devoted to clothing and home wares by 10 percent, said the company, which has 304 U.K. clothing and home stores. Taken together, Rowe’s actions will lead to the loss of 60 clothing outlets.
M&S shares rose 1.4 percent to 343.8 pence at 8:09 a.m. in London. They have declined 23 percent this year, heading for their worst annual performance since 2008.
The majority of the international closures are in the retailer’s European businesses, with M&S planning to completely exit Belgium, Hungary, Poland and the Netherlands. The retailer will also close seven stores in France and all of its 10 stores in China. The closures will take place over next 12 months and result in costs of 150 million pounds to 200 million pounds.
International businesses that are outright owned by M&S recorded a loss of 31.5 million pounds last year, while its franchised businesses reported a profit of 87.3 million pounds.
Outside its main market of the U.K., M&S currently operates about 480 stores across 59 countries in Europe, Asia and the Middle East.
M&S expects gross margins in its clothing and home business to expand by between zero and 0.5 percentage points for the year, cutting the forecast due to the weakness of sterling. The retailer had previously predicted an expansion of between 0.5 and 1 percentage point.
Underlying group pretax profit fell 19 percent to 231.3 million pounds in the first half. That compared with the 218 million-pound estimate of 18 analysts surveyed by Bloomberg.
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